For decades, critics and states have wooed sports teams through hefty subsidies for new arenas and stadiums, sums that have grown along with the facilities’ price tags – despite the howls of economists who deem them a poor use of public money.

Critics now have fresh momentum as the Obama administration takes aim at the subsidies. President Barack Obama’s 2016 budget, presented to Congress last month, calls for barring the use of tax-exempt bonds to finance professional sports facilities. Such bonds have raised about $17 billion during the past three decades, with proceeds funding construction of major-league stadiums and arenas in cities from Seattle to Baltimore.

In a nutshell, the government is arguing that municipal bonds used to finance a public stadium shouldn’t be tax-free, because the bonds don’t fulfill a legitimate public purpose. That is, they don’t promote economic development.

Research on the issue has piled up during the past two decades. The conclusion: A city’s economy doesn’t get a bump from bringing in a new sports team or building a stadium – and scarce economic development dollars would be put to better use with other investments.

“You’re not going to get income growth, you’re not going to get tax growth; you’re not going to get employment growth,” said Daniel Coates, an economist at the University of Maryland, Baltimore County who studies the economic effects of pro-sports teams and facilities.”

A 2007 study in the Journal of Sports Economics examined cities that gained professional teams. It found adding a team did “not have a positive economic impact on the local community” and didn’t raise regional incomes.

I think that if you look at the cities that benefited from the addition of a professional team, you’ll find that there was an unmet demand that a new entertainment outlet satisfied. Oklahoma City, for instance, had a rapid rise in incomes as a result of the expansion of their energy sector. Other cities may have had broad regional economies to support a new team.

Just because you build it, doesn’t necessarily mean that people will come. Supply doesn’t create demand.

When MountainStar Sports Group talked our lame duck city government into buying them a ballpark, they promised collateral development. So far, it hasn’t come. In fact, SoHo, the nearest free-standing liquor license, went out of business last month. Any economic development that’s taken place seems to have only taken place in MountainStar’s bank accounts.

2 comments

Hey, good catch. The WSJ article caught my eye too. It affirms what many people said during the stadium debacle — that a sports team and new stadium do not boost a city’s economy. Unfortunately, no one at the city cared/cares about learning from the experience of others.